Even a couple of years ago, the break-up and sale of Emap, one of the UK's most distinctive media groups, was unthinkable. As was the notion that its business-to-business assets, formerly the least glamorous outposts of Emap's svelte global empire, would be its most desirable properties.
In hindsight, it's also remarkable that the unravelling of the Emap story took a mere ten months - and that the speculations of February came to pass before December was out. If you were looking for evidence that the consumer media game has changed utterly in an increasingly volatile digital information economy, then it's to be found somewhere in this salutary tale.
1. Emap's woes can be traced back to its doomed attempt to break into the US market. It bought Petersen, a US consumer magazine company, in 1998 for £1 billion, lost its nerve during the downturn triggered by the dotcom crash, then retreated in disarray, selling its US assets to Primedia in 2001 for £336 million. Heads rolled, not least Emap's then chief executive Kevin Hand, and there was a lack of strategic direction as the company cast around for a successor. In 2003, Tom Moloney was eventually promoted from within - a long-term Emap employee, he had been the chief operating officer and, before that, chief executive of Emap USA. The City was already impatient to see a new blueprint for growth, and analysts soon began questioning if Moloney was offering the right sort of dynamic leadership.
2. In February 2007, following a run of poor financial results and a sharp fall in Emap's share price, Moloney appointed the consultancy company McKinsey to undertake a strategic review. Company spin doctors told the City that the outcome would probably involve a touch of "spring cleaning" (minor disposals) and a break-up of the company was not under consideration. However, some analysts were speculating that this was now the only option.
3. Yet, as winter turned to spring, the company still seemed to be adrift, with no urgent sense of purpose or direction - and on 17 May, the board acted, inviting Moloney to step down. This triggered frenetic bid speculation in the financial press - but Emap's chairman, Alun Cathcart, who announced he was also taking on the role of chief executive on a temporary basis, dismissed such talk.
4. But disposals began nonetheless. In July, the company sold its Irish radio stations for £135 million to Communicorp, and days later sold a 50 per cent stake in its music TV business to Channel 4. By the end of the month it had also announced another strategic review, this time to be carried out by Citigroup and Lazard. The Emap share price began to rise as bid speculation renewed - with interest focusing on the more profitable business-to-business side of the group. United Business Media, Reed Elsevier, Daily Mail & General Trust and Apax Partners were reckoned to be in the frame. GCap, Global Radio and Guardian Media Group were thought to be interested in Emap's radio assets.
5. By November, Emap revealed that, although there was no lack of interest in its business-to-business assets, it had not received any offers for the whole group (its preferred outcome) - and couldn't countenance being left with just an underperforming consumer magazine division on its hands. The break-up option began to look more palatable, however, when H Bauer emerged as a potential bidder for the consumer magazines in early December.
6. Acceptance of Bauer's £1.14 billion offer for Emap's radio and consumer magazine assets was unveiled on 7 December. Bauer Verlagsgruppe publishes 166 magazines in 14 countries across Europe and has radio interests in both Germany and Poland. Its existing UK properties include Bella, Take A Break and TV Quick. The Emap assets it has acquired include Heat, Closer, Grazia and FHM. Kiss and Magic are the main radio networks involved.
7. A £1 billion joint offer from Guardian Media Group and Apax for the business-to-business assets, including trade exhibitions, conferences, awards (including Cannes Lions) and magazines (including Construction News and Broadcast), was accepted on 22 December. These assets may be merged with Incisive Media, a trade magazine publisher acquired by Apax in 2006.
WHAT IT MEANS FOR ...
- Paul Thomas, the investment director, publishing, at MindShare, reckons the Emap consumer magazine titles have found a good home: "Bauer is a vastly experienced publisher - although it's true it is traditionally stronger in the weeklies market. I think it is more ruthless than Emap, and is likely to get more out of these assets."
- But some analysts have put a different spin on Bauer's penchant for weeklies and have continued to speculate that it may seek a trade sale of glossy titles such as New Woman and FHM. The National Magazine Company is one possible destination.
- It will also want to make full use of Emap Advertising, the consumer media sales division it will acquire alongside the magazines. However, this could prove tricky - Bauer's UK titles are currently sold by The Publishing Consultancy, an independently owned sales house.
THE RADIO MARKET
- Bauer isn't exactly famed for its radio expertise in the UK market. On the other hand, it can draw on group know-how - it currently owns stations in Germany and Poland. Still, that hasn't stopped some observers speculating that it might want to sell on some of its newly acquired assets at some stage. Global Radio, a private equity-backed operation chaired by the former ITV boss Charles Allen, would be interested if that were so, but has also bid, so far unsuccessfully, for GCap Media.
GUARDIAN MEDIA GROUP
- GMG has made no secret of its ambitions to diversify into business media. And interestingly, this deal furthers its relationship with Apax - it sold just under 50 per cent of its Trader Media Group to Apax in 2007.